Danantara, Catudaya, Unlocking Indonesia’s Future Potential

Tauhid Nur Azhar

Photo by Bayu Prahara on Unsplash

As a country with immense potential resources, Indonesia is a real representation of the idiom “emerald in the equator”. From demographic potential to energy potential. From the earth’s resources to biodiversity in the ocean, which is the gateway to the ecosystem of the two main oceans in the world.

Where all these resources are capital or funds that can be optimized as drivers of sustainable development. Therefore, Indonesia, under the leadership of President Prabowo Subianto, plans to establish Daya Anagata Nusantara, a holding company that manages the country’s strategic assets to drive sustainable growth. The management model is similar to Temasek Holdings in Singapore and Khazanah Nasional in Malaysia, but adapted to the economic, political, and social context of Indonesia.

In line with this plan, the thoughts of Sri Mulyani Indrawati, the Minister of Finance of the Merah Putih cabinet, on the role of fiscal and monetary policies for economic stabilization and inclusive growth creation, become an important source of inspiration. In various occasions, Sri Mulyani emphasized the importance of flexible and responsive fiscal policies, especially in facing global pressures.

By optimizing the existence and function of the super holding, which is an integrated investment body, Daya Anagata Nusantara, the Indonesian government can reduce its dependence on APBN funding and foreign loans, and grow independent revenue sources. The revenue from managing strategic assets can be used to finance projects that drive economic growth and support sectors that are vulnerable to global pressures, such as the health and education sectors.

According to its official website, the Investment Management Agency (BPI) Danantara was established to carry out the task of managing the country’s strategic investments. In carrying out its mission, Danantara will drive Indonesia’s economic transformation by growing world-class corporations. Danantara is also committed to supporting national development and creating prosperity for all Indonesian people.

The name Danantara, which was coined by President Prabowo Subianto, comes from the combination of the words Daya Anagata Nusantara. This name symbolizes the strength of Nusantara’s future and the collective strength of Indonesia, which is ready to face global challenges, create opportunities, and place Indonesia on an equal footing in the global economy.

Danantara is present as a catalyst for national investment, playing an important role in realizing the Vision of Indonesia Emas 2045. Danantara’s tagline “For Indonesia Setara” or “For Indonesia, For the World” emphasizes Danantara’s commitment to making Indonesia equal to developed countries in the global economy, and reflects Danantara’s determination to strengthen the economic and social welfare of the nation, drive inclusive and sustainable progress.

With the optimization of state assets through Daya Anagata, Indonesia is expected to be able to reduce foreign loans and increase national revenue independently. According to the Permanent Income Hypothesis, funds obtained from managing state assets can be allocated for development financing and maintaining a controlled budget deficit.

On the monetary side, the effect of asset management by Daya Anagata is predicted to have a positive impact on the stability of the rupiah exchange rate. With diversified strategic investments, this holding will increase foreign exchange reserves, making it more resilient to global fluctuations. Economists like Joseph Stiglitz argue that a carefully managed state-owned holding can be an effective tool in avoiding dependence on foreign capital.

Danantara, if it is to play a role as an investment institution that obtains capital from monetizing assets in the form of natural resources through a sovereign wealth fund (SWF) mechanism, can use Temasek and Khazanah as benchmarks.

Singapore and Malaysia, two countries that have become symbols of economic stability in Southeast Asia in recent decades, have successfully utilized their resources through state-owned holding companies, namely Temasek Holdings in Singapore and Khazanah Nasional Berhad in Malaysia. Both entities were established with similar goals; as capital machines mandated to manage state assets for sustainable growth.

Temasek, since its establishment in 1974, has played a crucial role in driving Singapore’s growth. Adopting the Sovereign Wealth Funds (SWF) theory, Temasek manages a portfolio of investments that includes various sectors, from technology to energy, both domestically and internationally. According to international economist Andrew Sheng, Temasek shows an effective model of synergy between public assets and strategic investments, minimizing dependence on external resources.

Khazanah Nasional, in Malaysia, was established in 1993 and became a pioneer in innovative investments for Malaysia. This holding company has a developmental state approach, where the focus is not only on financial profits but also on social development. According to Jomo Kwame Sundaram, a Malaysian economist, Khazanah serves as an extension of the state in ensuring a balanced economy, where strategic sectors such as education and health receive significant support.

One of the approaches taken by Temasek is to invest its assets in various sectors and geographic regions, which helps reduce economic dependence on a single sector. Daya Anagata Nusantara can play a role in international investments that support the stability of the rupiah exchange rate. This is in line with the concept of risk sharing, which is considered important by economists such as Joseph Stiglitz, where monetary stability is achieved by expanding investment diversification.

The existence of an investment institution with a Sovereign Wealth Fund (SWF) model can be one of the elements in the effort to implement a counter-cyclical process. The concept of counter-cyclical is an economic policy designed to stabilize the economy by opposing the economic cycle. In the context of fiscal or monetary policy, counter-cyclical measures are taken to reduce the negative impact of economic fluctuations by adjusting the rate of demand or supply in the economy, depending on the phase of the economic cycle.

The main goal of the counter-cyclical mechanism is to stabilize the economy by reducing the intensity of booms (economic surges) and busts (economic contractions) that can cause long-term economic instability, such as excessive inflation or high unemployment rates.

Fiscal policy in the context of counter-cyclical can be implemented with the government’s role in increasing public spending or reducing taxes to encourage consumption and investment. By doing so, aggregate demand in the economy is driven up, creating new jobs and increasing production.

Monetary policy counter-cyclical can be implemented by the central bank lowering interest rates or loosening monetary policy to increase the money supply and encourage investment and lending. This step helps increase the purchasing power of the community and encourages private spending and investment.

During the COVID-19 pandemic, economic activity was severely affected, and many families lost access to business and employment opportunities. This happened in many countries globally, but a special strategy is needed to support small and medium-sized enterprises (SMEs) that have been the backbone of economic growth in several countries, including Indonesia.

Therefore, the approach of the counter-cyclical model and the existence of a state investment institution that can optimize and evaluate resources that have not been quantitatively calculated is crucial.

In one of her speeches, Sri Mulyani explained how the United States recovered from the severe economic recession that hit the country in 2008. Quantitative easing became one of the efforts to control the money supply and, in turn, the value of the local currency became a influential currency in the region. Quantitative easing (QE) is a type of monetary policy that can be used in a counter-cyclical manner, especially to respond to recessions or economic contractions. In QE policy, the central bank buys financial assets, usually government bonds or other assets from the open market, to increase the amount of money circulating in the economy. This step aims to lower long-term interest rates, encourage investment, and increase the purchasing power of the community.

QE encourages aggregate demand (total spending in the economy) by reducing borrowing costs and increasing asset prices. When the central bank buys assets, the price of those assets rises, and their yield falls. This helps lower borrowing interest rates, increase investment activity, and encourage the consumer sector to spend.

QE can also encourage counter-cyclical efforts to avoid deflation during periods of recession. By increasing the money supply, this policy helps maintain price stability or even encourages inflation to a higher level if necessary, thereby reducing the risk of deflation.

QE policy is often implemented as a counter-cyclical response to maintain financial system stability in crisis situations. For example, during the 2008 global financial crisis and the COVID-19 pandemic, many central banks, such as the Fed, the Bank of England, and the Bank of Japan, implemented QE to prevent further declines in financial markets and ensure that credit flows to the real sector continued.

It would be very interesting if Indonesia, which is trying to rise as one of the new economic powers, marked by the discussion of joining BRICS and the establishment of Danantara, also utilizes digital transaction platforms and tools known as blockchain and cryptocurrency.

This unique model is slightly different from the financing model based on fiat money, giral, and fiat that we have known so far. The financing system without intrinsic guarantees but involves a decentralized distribution chain with its characteristics, especially in transaction authority.

The author, along with Dr. Dody Qori Utama and the Dean of the Bank Indonesia Institute, has proposed a semi-centralized BC concept where the aspect of authority is distributed in a limited manner. The goal is to ensure that the monetary control role of the central bank can still be carried out.

Utilizing cryptocurrency in a countercyclical strategy that we need to revive a country’s economy is a new approach that can offer benefits and challenges. Cryptocurrency, with its decentralized and liquid nature, offers several opportunities in promoting economic activity and financial stability, especially during recessions or economic contractions.

Here are some potential ways in which cryptocurrency can be used in a countercyclical context:

1. Increasing Liquidity with Access to Global Markets
   Cryptocurrency enables fast and cheap access to global markets because transactions are made without traditional banking intermediaries. In a weakening economy, governments can design schemes to facilitate cross-border business transactions using stablecoins to keep liquidity flowing, especially for small and medium-sized enterprises (SMEs) that usually struggle to access credit during difficult times.

A concrete concept that can be developed is to build partnerships with blockchain platforms for SMEs to receive and send international payments at lower costs.

This will increase cash flow for SMEs and make it easier for them to continue operating, thereby maintaining employment and reducing the impact of the recession.

2. Creating a National Stablecoin as a Monetary Tool
Some countries, such as China and the Bahamas, have introduced Central Bank Digital Currency (CBDC), which is essentially a national stablecoin. In a countercyclical context, CBDC can be used to distribute direct aid to the public and increase purchasing power. Additionally, CBDC allows central banks to monitor the flow of funds more directly and quickly to assess the effectiveness of stimulus.

A model implementation is for the government or central bank to issue a state-managed stablecoin (CBDC) for direct distribution to citizens’ digital wallets, especially during recessions or contractions.

This can speed up the distribution of aid and increase the purchasing power of the public without relying on traditional banking systems that may be slow or limited.

3. Facilitating Alternative Financing through Decentralized Finance (DeFi)
DeFi platforms enable users to lend and borrow funds without intermediaries, using smart contract protocols on blockchain. During a recession, DeFi can help individuals and small businesses access microcredit without the strict requirements of traditional banks.

A concrete implementation is for the government to provide support or guarantees to specific DeFi platforms or create a reliable platform where small businesses can access microcredit.

This can make it easier for entrepreneurs and the public to obtain capital or microloans, which can help maintain businesses or meet consumption needs.

4. Reducing Inflationary Pressure through Diversification of Reserve Assets
In times of economic contraction, some countries may experience high inflation due to a weakening currency. Governments can consider adding cryptocurrency to their foreign exchange reserves as a diversification tool, especially established cryptocurrencies like Bitcoin, CBDC if available and ready. The deflationary nature of these cryptocurrencies can help maintain the value of the country’s reserves.

A model implementation is for the central bank to allocate a small portion of its reserves in cryptocurrency or CBDC as an addition to traditional reserve assets like gold and foreign currencies.

The benefits that can be obtained are that this diversification can serve as a hedge against inflation driven by market uncertainty, especially when fiat currencies depreciate.

5. Using Tokenization for Infrastructure Financing
In a weakening economy, infrastructure projects are often difficult to finance. With blockchain technology, assets like infrastructure projects can be tokenized, where governments can offer tokens to domestic and foreign investors to finance specific projects. This enables the public to participate in financing development projects and can stimulate economic activity. Currently, this mechanism is done through bonds or government securities.

A concrete implementation is for the government to issue infrastructure tokens that can be owned by public or private investors as a means of financing projects.

The benefits of this concept include expanding public access to investment in government projects and providing a new, flexible source of funding for strategic projects.

6. Strengthening Export Policy through Cryptocurrency
Cryptocurrency can facilitate international payments quickly and cheaply, which is important for exporters in difficult economic times. Governments can utilize cryptocurrency to increase the competitiveness of local companies in exports, providing incentives to companies that use cryptocurrency in international transactions.

Concrete implementation, providing tax incentives or subsidies to companies that use cryptocurrency for international transactions.

The benefits of this system include reducing transaction costs for local exporters, strengthening their competitive position, and increasing foreign exchange earnings.

Let’s assume logically, if the value of resource assets is calculated rationally and becomes part of the capital valuation through SWF, which is partially substituted as tokens for development such as infrastructure, as well as subsidies for competitiveness and capital assistance with special incentive schemes, then the competitiveness of the national industry, upstream and downstream, will increase.

The potential of natural resources and assets, as well as revenue opportunities from carbon trade and intensification of the tax sector (fiscal) with the application of digitalization in the Core Tax system, can be managed more flexibly, focused, and oriented towards the competitive advantage of products and production systems. The increase in competitiveness with integrated management and harmonious stimulus with targeted subsidies will certainly be able to accelerate Indonesia’s economic progress to become a leader in the region.

Further Reading:

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2. Bordo, M. D., & Levin, A. T. (2017). Central bank digital currency and the future of monetary policy. NBER Working Paper Series.
3. Brunnermeier, M. K., James, H., & Landau, J. P. (2019). The digitalization of money. BIS Working Papers.
4. Carstens, A. (2021). Central bank digital currencies: Foundational principles and core features. Bank for International Settlements.
5. Chen, S., & Liu, X. (2020). The macroeconomic implications of digital currency: A survey. Journal of Economic Surveys, 34(5), 1105–1127.
6. Claeys, G., Demertzis, M., & Efstathiou, K. (2018). Cryptocurrencies and monetary policy. Bruegel Policy Contribution.
7. De Grauwe, P. (2020). The Economics of Monetary Union. Oxford University Press.
8. De Vries, A. (2018). Bitcoin’s growing energy problem. Joule, 2(5), 801–805.
9. Dyson, B., & Hodgson, G. (2016). Digital Cash: Why Central Banks Should Start Issuing Electronic Money. Positive Money.
10. Eichengreen, B. (2019). From commodity to fiat and now to crypto: What does history tell us? NBER Working Paper Series.
11. Fatas, A., & Mihov, I. (2012). Fiscal Policy as a Countercyclical Tool. CEPR Discussion Papers.
12. Friedman, M. (1969). The Optimum Quantity of Money and Other Essays. Aldine Publishing Company.
13. Gurkaynak, R. S., Sack, B., & Swanson, E. (2005). Do Actions Speak Louder Than Words? The Response of Asset Prices to Monetary Policy Actions and Statements. International Journal of Central Banking, 1(1), 55–93.
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16. Narayanan, A., Bonneau, J., Felten, E., Miller, A., & Goldfeder, S. (2016). Bitcoin and Cryptocurrency Technologies. Princeton University Press.
17. Prasad, E. S. (2021). The Future of Money: How the Digital Revolution is Transforming Currencies and Finance. Harvard University Press.
18. Rogoff, K. (2017). The Curse of Cash: How Large-Denomination Bills Aid Crime and Tax Evasion and Constrain Monetary Policy. Princeton University Press.
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